Accounting for Sales and Cash Receipts Making Accounting Relevant Sales of products or services generate revenue for a business. Making Accounting Relevant.

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Presentation on theme: "Accounting for Sales and Cash Receipts Making Accounting Relevant Sales of products or services generate revenue for a business. Making Accounting Relevant."— Presentation transcript:

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Accounting for Sales and Cash Receipts Making Accounting Relevant Sales of products or services generate revenue for a business. Making Accounting Relevant Sales of products or services generate revenue for a business. If you work at a retail business, what sales transaction have you participated in? Discuss the actions involved in the sale.

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Section 1Accounting for a Merchandising Business What You’ll Learn  The purpose of a merchandising business.  The difference between a retailer and a wholesaler.  Uses of the Merchandise Inventory account, and its rules of debit and credit.  Uses of the Sales account, and its rules of debit and credit. What You’ll Learn  The purpose of a merchandising business.  The difference between a retailer and a wholesaler.  Uses of the Merchandise Inventory account, and its rules of debit and credit.  Uses of the Sales account, and its rules of debit and credit.

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Why It’s Important As consumers, we buy goods from merchandising businesses daily. You need to understand the nature of these transactions to maintain accounting records for a merchandising business. Why It’s Important As consumers, we buy goods from merchandising businesses daily. You need to understand the nature of these transactions to maintain accounting records for a merchandising business. Section 1Accounting for a Merchandising Business (con’t.) Key Terms  retailer  wholesaler  merchandise Key Terms  retailer  wholesaler  merchandise  inventory  sales  inventory  sales

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The Operating Cycle of a Merchandising Business Section 1Accounting for a Merchandising Business (con’t.) A retailer is a business that sells to the final user, (the consumer). A wholesaler is a business that sells to retailers. A merchandising business produces revenue through a series of transactions called the operating cycle. A retailer is a business that sells to the final user, (the consumer). A wholesaler is a business that sells to retailers. A merchandising business produces revenue through a series of transactions called the operating cycle.

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The Operating Cycle of a Merchandising Business Section 1Accounting for a Merchandising Business (con’t.)

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Merchandise Inventory Account Goods bought for resale are called merchandise. The items of merchandise the business has in stock are referred to as inventory. The inventory is represented in the general ledger by the asset account Merchandise Inventory. Section 1Accounting for a Merchandising Business (con’t.) Merchandise Inventory Credit – Decrease Side Debit + Increase Side Normal Balance

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Sales Account When a retail merchandising business sells goods to a customer, the amount of the merchandise sold is recorded in the Sales account (Revenue). Section 1Accounting for a Merchandising Business (con’t.) Sales Debit – Decrease Side Credit + Increase Side Normal Balance